Monday, 12 December 2011

One small step for Huawei, one giant leap for China

As is often the case, the seemingly trivial turns out to be a giant event. I suspect this is the case with Huawei's announcement, buried in the back pages of financial newspapers that it would no longer pursue new business in Iran. So what , you might ask.  Read on.

One of the fundamental principles in China is the total separation of politics  & economics. It has one of the freest of capitalist systems (at least for Chinese) and one of the most controlled of political systems. In foreign affairs, China has diligently pursued a policy of complete non interference in political matters. Its policy in Africa is unique in history. It is rapidly colonising economically, but scrupulously keeping away from interference in local politics. It will do business with anybody - God, Archangel Gabriel, Satan, Devil whoever, as long as there is business to be done. Before you denounce it, consider that there is some merit in this approach - the Chinese say political matters are for the citizens of that country to decide and it is not their place to make value judgements on them. In this, they are completely different from the European colonisers of the past.

The first chink I have come across in this policy is this announcement from Huawei. Huawei is a large supplier of telecoms equipment to Iran. These are undoubtedly used for espionage and suppression. Iran is a pariah for many nations - no American company can deal there. There has been constant criticism in the West of Chinese companies who do business there, but that's not unusual  - they are often criticised for doing business with the likes of Mugabe. So why has Huawei taken this clearly political step. Before you think that this is one company deciding and not China - perish the thought. No company in China decides on any sensitive matter without the go ahead from the government. For the first time, atleast as far as I know, China is saying politics might dictate economics in foreign affairs.

Is it finally true that economic clout cannot be divorced completely from politics.  As China's economic power grows bigger and bigger in the countries it is doing business with, it becomes harder and harder to stand aside and say it is not involved with local politics. This is exactly what happened to the East India Company, which started in exactly the same way. Maybe China is reaching the inflexion point. One breach like the Huawei action and the dam has to burst. Can the Chinese now deal with blood diamonds in the Congo, or keep away from selling arms to Mugabe, for very long ? As it gets drawn more and more into global politics, it will have profound implications for the world and China. The world because, it will alter the balance of political power inexorably. And for China because it is not good at doing this - diplomacy is not its strong point and it will have to learn.

That's why I think, its one small step for Huawei ..........


Viji said...

Very insightful and thought provoking post loaded with implications written and unwritten.
One request - pls followup on this and keep us all updated. I definitely look up your blog to pick up what is happening in the world around - you may also call it lazy.
Of course with such simple and clear writeups, you are spoiling all of us!!
Great work with a lot of food for thought.

Ramesh said...

@Viji - Thanks Viji. Very kind.

J said...

Very interesting. China can longer act as if it only cares about their own interests and how they make the transition will be interesting to watch. The East India Company analogy is so fitting and scary.

Vishal said...

Very interesting perspective, Ramesh and thanks for exploding it the way you did in final paragraph.

There is this old saying which says money and power go together hand in hand. Money with only few ones ensures there is enough need for it and hence it becomes a power in hindsight.

The game of foreign affairs is also similar. One could hardly separate money and power. At some point of time, big business deals do impact political equations and China is perhaps feeling the heat now.

Hema said...

May be one of the greatest lessons for china. Let us wait and watch how fast they catch up.
It is amazing how you pick up such nitty-gritty and blow us off with such profound thoughts!

Shachi said...

An awesome analysis - to say the least :).

Having worked with them before, I know how it works with Chinese companies. This is indeed a game changer, and as you said, let's see how things play out near term as well as long term. This was long coming though!

Ramesh said...

@J - That is the problem with Chinese diplomacy - they loudly advertise that they care only about themselves. Concepts like finesee, tact, etc have to be learnt.

@Vishal - You have rightfully observed that you cannot separate money and power. Indeed the Chinese already have huge power in many African countries to the point of virtually owning some of them. And yet they have stayed scrupulously neutral in political matters. But the winds of change are coming.

@Hema - I believe China will find it difficult to manage diplomacy. Its not something that they have been good at over history. I believe it will be a learning process with many missteps.

@Shachi - Thanks Shachi. It was long coming and I believe China will take a long time to "get there".

Appu said...

I think you should write one post per day without fail :)

Ramesh said...

@zeno - Oh so kind ; but I fear you will all run away :)

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